Russian gold mining holding Seligdar has lost one notch in its credit rating. Expert RA downgraded the company’s rating from ruA+ to ruA, citing higher borrowing costs alongside continued high capital expenditures. At the same time, the agency revised its outlook from negative to stable.
The decision was driven by a straightforward issue: Seligdar accumulated more debt than originally planned. High interest rates increased the cost of borrowing, while the company continued to finance major construction projects, preventing a reduction in leverage. By the end of last year, the company’s debt-to-EBITDA ratio had risen to 3.7x, while interest coverage declined to 1.7x.
The company’s liquidity position, however, remains relatively strong. According to Expert RA, Seligdar has sufficient resources over the next 12 months to cover debt repayments, interest expenses, and ongoing capital expenditures. The agency also highlighted the company’s diversified pool of creditors and efforts to extend the maturity profile of its debt portfolio.
The first-half financial results present a mixed picture. On the positive side, IFRS net profit returned to positive territory at RUB 3.392 billion, compared with a loss of RUB 2.157 billion a year earlier. Revenue increased by almost 50% to RUB 41.7 billion, supported by favorable prices for gold, tin, tungsten, and copper. EBITDA rose by roughly three-quarters to RUB 15.8 billion.
On the other hand, cash flow from operating activities after capital investments remained negative at around RUB 14 billion. Net debt increased by more than half to above RUB 153 billion. The net debt-to-adjusted EBITDA ratio stood at 3.6x, exceeding the company’s 3.0x threshold, above which shareholder distributions are suspended.
Vasily Danilov of VELES Capital believes investors should not expect an interim dividend this year. The company’s debt obligations remain too high, while the financial base available for distributions has moved into negative territory.
Seligdar’s situation illustrates a broader challenge facing mining companies: even record revenue does not necessarily translate into financial flexibility when large-scale construction programs are running simultaneously. The company’s rating remains within an investment-grade range under the agency’s methodology, but its debt cushion is shrinking faster than earnings are growing.
Source: Gold Mining Bulletin
Image: Seligdar
